FULL YEAR RESULTS PRESENTATION APRIL 2019 D I S C L A I M E R This - - PowerPoint PPT Presentation

FULL YEAR RESULTS PRESENTATION

APRIL 2019

D I S C L A I M E R

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• pinions otherwise arising in connection therewith.

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• Company. Any dealing or encouraging others to deal on the basis of such information

may amount to insider dealing under the Criminal Justice Act 1993 and/or to market abuse under the Financial Services and Markets Act 2000. 2

Steve Lucas Chairman

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S U C C E S S F U L 2 0 1 8 , W E L L P O S I T I O N E D F O R T H E F U T U R E

Ferrexpo is well placed to benefit from demand for pellet

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Continued strong financial performance – Large resource and well invested assets – Competitive cost position – High value product 65% Fe pellets – High quality well-diversified customers – Record price premium for our product – Net debt at a 6 year low – Further investment to grow output over medium term – Record dividend pay-out ratio of 41%: 23.1 cents per share (2017: 16.5 cents per share)

2018 FINANCIAL PERFORMANCE

Chris Mawe, CFO

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$M (unless otherwise stated) 2018 2017 Change Pellet production (kt) 10,607 10,444 2% Sales volumes (kt) 10,227 10,467 (2)% Avg CFR 62% Fe fines price ($/t) 69.5 71.3 (3)% Avg C1 cost (US/t) 43.3 32.3 34% Revenue 1,274 1,197 6% Cost of sales (508) (411) 24% Gross profit 766 786 (3)% Selling & distribution (260) (220) 18% General & admin & other (73) (83) (12)% Operating foreign exchange (losses)/ gains (5) 7 Operating profit 428 490 (13)% EBITDA 503 551 (9)% Profit for the year 335 394 (15)% Diluted EPS (cents) 56.7 66.9 (15)% Full year dividend declared (ordinary + special) per share (cents) 23.1 16.5 +40% Net debt (339) (394) (14)% Net debt to EBITDA (x) 0.67 0.72 (7)%

Revenue up 6% – Average selling price increased by $9 per tonne – Strong market environment for pellets continued (significant increase in premiums) – Lower sales volumes reflect temporary logistics constraints Costs reflect expected cost increases – Higher costs (+$11 per tonne)

• Increased commodity prices, maintenance & mining activity, local inflation
• UAH appreciated slightly vs. US$ adding pressure

EBITDA – Gross profit down 3% – Higher freight costs reflected in revenue & selling & distribution costs – $12M swing in operating forex loss Balance sheet continues to strengthen – Net debt reduced by $55M – Available liquidity $268 million (incl. undrawn PXF facility of $205 million1) – Net debt to EBITDA comfortably below 1x – 2019 debt amortisations covered by cash & undrawn facilities Dividend at record level for Group – Dividend reflects strong business profile & outlook – Full year dividend 23.1 cents per share (FY 2017: 16.5 cents per share)

• Final dividend declared (ordinary + special) 13.2 cents per share

(2017: 9.9 cents per share)

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S T R O N G B U S I N E S S P R O F I L E

Summary Financials

1: In March 2019 Ferrexpo drew down US$185 million of its available PXF facility

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EBITDA 2018 VS. 2017 (US$M)

H I G H E R P E L L E T P R E M I U M S , H I G H E R C O M M O D I T Y C O S T I N P U T S & L O C A L I N F L AT I O N

551 503 17 19 32 111 15 5 141

2017 EBITDA Production volumes Pellet premium Inventories Fines price C3 freight C1 cost Operating forex &

• ther

2018 EBITDA

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C O S T S U P R E F L E C T I N G H I G H E R C O M M O D I T Y P R I C E S & S TA B L E C U R R E N C Y I N S T R O N G S T E E L M A R K E T

2018 costs reflect:

– Commodity price inflation: higher diesel, gas, steel prices, coal

• Avg brent in 2018 up 31% at $71/t vs. $54/t in 2017

– Local inflation

• PPI 18% year on year
• Salary increase of 13% (real) annualised

– UAH appreciated 1% against $ from 1.1.18 to 31.12.18

• Approximately 40% of operating costs in UAH (incl. rail tariffs)

– Higher level of repair & maintenance costs – Increased stripping at FPM

Historic C1 cash cost vs. received price ($/tonne) C1 cash costs breakdown 2018 vs. 2017

$ per tonne

C1 cash costs – over 60% commodity related

12012 C1 cost included ramp up costs at FYM 2Realised FOB price is calculated as Platts 62% Fe CFR + pellet premium + Fe premium – C3 freight

32.3 43.3 3.3 2.8 2.1 1.9 0.7 0.2 10 15 20 25 30 35 40 45 50

C1 cost 2017 Commodity price increases Local inflation Repairs & maintenance Stripping Royalties Other C1 cost 2018

0% 10% 20% 30% 40% 50% 50 100 150 200 2011 2012 2013 2014 2015 2016 2017 2018 C1 cash cost Received FOB price EBITDA margin

$ per tonne

23% 9% 10% 8% 16% 9% 8% 9% 5% 3% Electricity Fuel Gas Grinding media Materials Spare parts Maintenance Personnel Royalties Explosives

Cash flow 2018 vs. 2017 Working capital reflects – Low grade ore $40M or $3.7 per tonne (2017: $5.0 per tonne) – Higher trade receivables due to increased prices in 2H 2018 – Increased pellet stocks of 0.4MT due to temporary logistics constraints – Other inventories reflect commodity cost inflation & increase in maintenance – December VAT outstanding of $12M (received in January 2019) Capex reflects sustaining & modernisation as well as CEP1 – $24m invested in Concentrator Expansion Project 1 – Project on track to achieve run rate of 12MT in 2020 Reduced debt & strong liquidity – Repaid $95M of debt – Available liquidity of $268M vs. $312M as of 31 December 2017 – Strong credit metrics

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S T R O N G C A S H F L O W G E N E R AT I O N F U R T H E R S T R E N G T H E N I N G B A L A N C E S H E E T

$M (unless otherwise stated) 2018 2017 Change EBITDA 503 551 (9)% Working capital movements (76) (57) 33% Working capital change – stockpiled ore (40) (53) (25)% Interest paid (43) (49) (12)% Income tax paid (44) (14) 214% Other (incl. non-cash operating FX) (8) (26) (69)% Net cash flow from operating activities 292 353 (17)% Capex (135) (103) 31% Dividend paid (97) (58) 67% Other

• 6
• Net cash flow

61 198 (69)% Proceeds from new borrowings 214

• Repayment of borrowings

(309) (239) 29% Cash balance at end of period 63 98 (36)% Available facilities 205 214 (4)% Net debt (339) (394) (14)%

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E X C E L L E N T C R E D I T M E T R I C S

Strong reduction in net debt ($M) – In 2018 PXF facility extended from $195m to $400m

• $205M undrawn as of 31/12/20181
• 2019 debt maturities fully funded

– Since 31 Dec 2015 net debt has reduced by $529M – Net Debt to EBITDA 0.67x (as of 31/12/2017: 0.72x) – Rated at maximum level above Sovereign – Further deleveraging expected in 2019 Amortisation profile as of 31 December 2018 ($M)

868 589 394 339 2.8 1.6 0.72 0.67 0.5 1 1.5 2 2.5 3 100 200 300 400 500 600 700 800 900 1000 2015YE 2016YE 2017E 2018YE Net Debt Net debt to EBITDA

$M Net debt to EBITDA (x)

63 205 33 33 33 33 33 33 33 33 33 33 33 33 173 2018 YE Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

Cash Undrawn PXF-18 PXF-18 ECA Bond

Assumes full draw of remaining $205M of PXF

1: In March 2019 Ferrexpo drew down US$185 million of its available PXF facility

– Good set of financial results – Demand for the Group’s product remains high – Record dividends (+40%); 31% increase in capex & strong balance sheet maintained – Pellet supply expected to remain tight in the short to medium term – High barriers to entry into the pellet market – Long term growth drivers underpin pellet demand

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C O N C L U S I O N T O F I N A N C I A L R E V I E W

Strong results Excellent Industry Dynamics

The town of Horishni Plavni Pelletizer facilities Concentrator facilities Poltava mine Yeristovo mine Tailings Dam

MARKET & OPERATIONS REVIEW

KOSTYANTIN ZHEVAGO, CEO

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S T R O N G D E M A N D E N V I R O N M E N T F O R P E L L E T

Crude steel capacity utilisation (%) Atlantic long term contract pellet premium ($ per tonne) Average Ore Burden Mix to Produce Hot Metal (%)

– Pellet use varies by mill & region – Europe accounts for 33% of imports, NE Asia 17% – Largest importers of pellet: China, Japan, Germany, Saudi Arabia, Turkey – Chinese mill requirements for high grade ore converging with developed country requirements:

• Higher blast furnace productivity (supply-side reforms)
• Reduction in air emissions (environmental protection a top priority

for government)

• Improvement in final product quality

Source: CRU January 2019

91% 83% 60% 65% 70% 75% 80% 85% 90% 95% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 China Ex-China 24 56 11 40 37 30 32 37 34 32 45 57 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 58% 65% 9% 76% 36% 12% 89% 10% 6% 23% 2% 14% EU Japan MENA China

Lump Pellet Sinter

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I N C U M B E N T P E L L E T P R O D U C E R S E N J O Y H I G H B A R R I E R S T O E N T RY

Exports of pellets peaked in 2010 at c. 150MT CRU breakeven pellet cost curve to China:

– Pellet exports peaked in 2010 & since declined 14% – In 2019, CRU expect pellet exports to fall approximately 10MT: – Incumbents in Sweden, Canada, Bahrain & new supply from India & Iran +c.7-9MT

• Chile c. -2MT
• Brazil c. -11MT

– Other Brazilian restart & volumes remain unclear – Pellet breakeven cost curve is moving to the left as supply exits the market

Ferrexpo was third largest pellet exporter in 2019:

Definition: Business Costs/Breakeven costs are the sum of Realisation Costs and Site Costs. Site Costs gives the ex- works cost of mining and processing the ore. Realisation costs include the cost of getting the material to market, the marketing of the material and the financing cost of selling the material. The power of Business Costs is that by adjusting all product qualities relative to the same benchmark (62% fines product delivered north China) it allows all mines to be compared on a cost curve on a like-for-like basis. This also means that by subtracting the benchmark price from the business costs for a mine you get an estimate of cashflow from that operation.

MT 2010 exports 2018 exports % change

• vs. 2010

2019 forecast Exports of pellet feed 30 91 203% 112 Exports of pellet 151 132 (14)% 120 Exports of lump 160 285 78% 287 Exports of fines 759 1,133 49% 1,120 Total 1,100 1,641 49% 1,639

y-axis: Business Costs for pellet exports, 2018, US$/dmt CFR China x-axis: cumulative pellet exports, 2018, Mt (dry)

*Delivery to China Assumes all shipments from all producers go to the Chinese market, which has a higher pellet premium than other pellet markets

Source: CRU February 2019

Brazil

• ffline

production MT Market share Pellet exports BF Pellets DR Pellets Vale (Brazil & Oman) 33.4% 44.1 19.9 24.1 LKAB 14.3% 18.8 11.9 6.9 Ferrexpo 7.7% 10.2 10.2

• IOC

6.3% 8.3 7.0 1.3 India 5.8% 7.6 7.5 0.1 QCM 4.2% 5.6 5.0 0.5 Severstal 4.2% 5.5 4.0 1.5 Bahrain Steel 4.2% 5.5

• 5.5

US Steel 4.0% 5.3 2.9 2.4 Cliffs 3.8% 5.0 0.6 4.4 Metalloinvest 3.2% 4.2 4.2

• CMP

2.2% 3.0 2.9 0.1 Grange 1.6% 2.1 2.1

• Evraz

0.5% 0.6

• 0.6

Subtotal 95.4% 125.9 78.3 47.6 Others 4.6% 6.0 4.2 1.8 Total 100.0% 131.9 82.5 49.4

C A P I TA L I N V E S T M E N T – C O N T I N U E T O I N C R E A S E Q U A L I T Y & P E L L E T O U T P U T W H I L E M A I N TA I N I N G A S T R O N G B A L A N C E S H E E T

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– Since 2007 the Group has increased output of 65% Fe pellets by 168% – Since 2007 the Group has increased total production volumes by 17% – By 2021 production volumes to increase a further 15% to 12MT – Investment opportunity to increase production volumes to 20MT

2007

Acquired 49.9% of berth at Port Yuzhny enabling seaborne shipments Start of development

• f FYM (new open pit

mine)

2008 2010

Acquired barging

• peration on Danube

River to transport pellets Commenced modernisation & quality upgrade programme at FPM

2011 2012

First ore at FYM First shipment of capesize vessels to customers in Asia

2013 2014

Completion of FPM's quality upgrade programme & ramp up of premium 65% Fe pellets; refurbishment

• f 1st pellet line

Increased ownership

• f rail cars to

transport 80% of production volumes

2015 2017

Commencement

• f Concentrator

Expansion Programme (CEP1); refurbishment

• f 2nd pellet line

Commissing of MFC1, increased maintenance vs. 2015 & 2016; refurbishment of 3rd pellet line

2018              2019

Refurbishment

• f final pellet line;

New concentrate storage area; completion of engineering studies for pellet expansion to 20MT+ Completion of CEP1- increase in pellet feed output by c. 1- 1.5MTPA; completion

• f MFC2

2020 2021

Increase in pellet output to 12MT Continue to increase pellet quality, commencement

• f CEP2 & pellet plant upgrade

Future projects not yet Board approved, engineering studies in progress 20MTPA+ pellet

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C A P I TA L A L L O C AT I O N B E C O M I N G M O R E B A L A N C E D

Gross Debt ($M) Capital Investment ($M) Dividend pay out1 (%)

Note: No cash flows were paid out for dividends in the 2016 financial year. A final dividend of 6.6 US cents was declared in March 2017 in relation to the 2H of 2016.

Split of cash flows between debt repayment, dividends, capex

734 501 402 2016 2017 2018 21% 25% 41% 2016 2017 2018 48 103 135 2016 2017 2018

20161 2017 2018

Capex Debt repayment Dividends Capex Debt repayment Dividends Capex Debt repayment Dividends

O U T L O O K

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• Steel margins to recover from lows seen in 4Q 2018 but not to 2018 highs
• Pellet premiums strongly correlated to steel margins
• Seaborne supply of pellets to remain tight following major supply disruptions in Brazil
• Expect higher received prices in 2019
• Continue repairs & maintenance programme, including 75 day pellet line shutdown in 2H 2019.

2019 production volumes to be in line with 2018

• Costs subject to production volumes, commodity input prices, the Hryvnia exchange rate &

local inflation, also reflect higher repair and maintenance expenditure

• Subject to achieved pellet pricing & additional cash flow generation, capex will increase in 2019

to include spend on future growth projects. It is currently expected to be in a range of $220M to $300M.

Thank you

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Appendix

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Premium 65% Fe iron ore pellets

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World class asset –

• ver $2.2bn invested since IPO

Established logistics

F E R R E X P O I S A H I G H Q U A L I T Y I R O N O R E P R O D U C E R W I T H C. 8 % M A R K E T S H A R E O F G L O B A L P E L L E T E X P O RT S

12% 6% 17% 16% 47%

CENTRAL & EASTERN EUROPE CHINA & SOUTH EAST ASIA NORTH EAST ASIA WESTERN EUROPE TURKEY, MIDDLE EAST & INDIA

High quality sales portfolio

Sailing time to Asia Days Ukraine 30 Brazil 40 Norway 50 Canada 55

2 4 6 8 10 12 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MT pellets 62% Fe pellets 65% Fe pellets

Significant resource base – +40 years of 2P reserves at FPM & FYM

PRODUCTION DEVELOPMENT LICENCE MAINTENANCE

13.1

FSU SOVIET CLASSIFIED RESOURCES

13.1 6.6

JORC CLASSIFIED RESOURCES

BROVARIKOVSKO YE 4.0BT MANUILOVSKOYE 3.4BT KHARCHENKOVSKO YE 2.8BT VASILIEVSKOYE 1.4BT ZARUDENSKOYE 1.5BT GALESCHINSKOYE 0.3BT BELANOVSKOYE 1.7BT YERISTOVSKOYE 1.1BT GPL 3.4BT

Logistics: barging, rail cars, port/ transshipment c.$300M FPM: modernisation & quality upgrade c.$1.1BN FYM: new mine & infrastructure c.$600M

*

A trial shipment to the US accounted for 1% of sales volume in 2018

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TA I L I N G S D A M

FPM’s tailings storage facility – Ferrexpo has 1 tailings dam split into 4 sections – Centre line construction methodology – Covers 1500 hectares – Operating since 1974

• Most recent section commenced in 2012

– Safety audits twice a year by independent 3rd parties – In line with government regulations